New Trust Disclosures

With the introduction of the 39% tax rate for individuals from 1 April 2021, the Inland Revenue is increasing the information it collects from trusts to assess compliance with the new tax rate and to monitor how trusts are being used.

Trust disclosure obligations

The additional information that needs to be included in a trust’s tax return (from the 2022 tax year) includes:

• name, IRD number and date of birth of beneficiaries, settlors and those with power of appointment and removal of trustees
• financial statements
• details of settlements
• details of distributions to beneficiaries

Non-active trusts, charitable trusts, Maori authority trusts, and New Zealand trustees of foreign trusts do not need to provide this additional information.

Increased disclosure obligations to beneficiaries

In addition to the above, from January 2021, trustees need to disclose the following trust information to all beneficiaries, including parents/guardians where the beneficiary is under 18:

• that they are a beneficiary
• name and contact details of all trustees
• that they can request a copy of the trust deed and the financial statements

Trustees can choose not to provide requested information to beneficiaries provided the request has been reasonably considered. The beneficiary does not need to be told the reason for not providing the information.

Change to definition of settlor

There has also been a change to the definition of a settlor.  A beneficiary with a current account greater than $25,000 will now be deemed to be a settlor if a market interest rate or Inland Revenue’s prescribed interest rate is not charged. This can have implications for the beneficiary such as student loan repayments and social assistance.